Interim
Joint Committee on Transportation

Minutes
of the<MeetNo1>Third Meeting

of the 2001 Interim

<MeetMDY1>October 2, 2001

The<MeetNo2>third meeting of the Interim Joint
Committee on Transportation was held on<Day>Tuesday,<MeetMDY2>October 2, 2001, at<MeetTime>10:00
AM, in<Room>Room 149 of the Capitol Annex. Senator Virgil
Moore and Representative Hubert Collins co-chaired the meeting, and the
secretary called the roll.

Representative Lee moved to approve the minutes of the
Committee’s September 4, 2001 meeting, as submitted. Senator Herron seconded
the motion, which passed by voice vote.

First on the Committee’s agenda was the Transportation
Cabinet’s 2002 legislative package. Deputy Secretary Linkes and Deputy
Commissioner Roberts presented the information. Mr. Roberts said, as the
result of the state’s projected budget shortfall, the Cabinet does not
anticipated initiating any new programs and presented only three major
legislative issues. Those issues were the project management system of
pre-financing biennial construction projects, a primary seatbelt initiative,
and the acquisition of property for highway projects.

Mr. Roberts said, during the 2000 Regular Session, it was
necessary to suspend several provisions in the appropriations bill. That
language, authorizing pre-financing of construction, was contained in HB 502
(KRS 45.242 and KRS 45.244). He said similar pre-financing provisions would be
included in the Cabinet’s 2002 Regular Session budget language. He noted that
once the Cabinet proceeded with this type of financing it is difficult to turn
back.

Mr. Roberts said the Cabinet appreciated the House
Transportation Committee’s support for last session’s primary seatbelt
legislation, and Representative Jodie Haydon for sponsoring the measure. Mr.
Roberts said that the Cabinet intends to do a better job convincing the General
Assembly of the measure’s benefits. He said the primary seatbelt law is the
least expensive and most effective way of reducing fatalities and injuries on
Kentucky’s highways, and that the saving of lives has been proven effective in
the 14 states that have enacted a primary seatbelt law.

Mr. Roberts said a timely acquisition of property could
speed up a highway project’s completion. The state’s inability to take
possession of property has resulted in the delaying of crucial projects,
statewide. He said a project may have 100 parcels of property to be acquired
and the delay of one property acquisition can significantly delay the entire
project. Mr. Roberts said that this session, the Cabinet is taking a different
approach in the acquisition of property. The Cabinet is currently researching
a “quick take provision” method of acquisition, similar to the provisions
enforced in West Virginia. Several committee members voiced their concerns
with the Cabinet only contacting constituents once prior to condemnation.

Mr. Roberts said that there would not be federal mandates,
deficient administrative regulations, or executive orders in the Transportation
Cabinet’s legislative package. He said one of the reasons is because the
Transportation Committee has always provided the Cabinet with the statutory
tools it needed to operate.

Chairman Collins asked if there would be any money
appropriated for the primary seatbelt issue. Mr. Roberts said there would be a
small amount of federal money for incentive grants, around one million
dollars. Chairman Collins asked what was the percentage of Kentucky’s seatbelt
usage. Mr. Roberts said it was approximately 58-60 percent, while the states
that have primary seatbelt laws percentage rates are around 75-80 percent.

Senator Robinson said that he believed the property
acquisition process was used as a tool for unfair treatment. He asked Mr.
Roberts if the Cabinet would face any constitutional problems using the quick
take method of acquisition. Mr. Roberts said he did not anticipate any
constitutional problems, only a few statutory problems.

Representative Lee stated that he would like to meet with
Cabinet officials to discuss the AVIS verses the KAVIS system. He said he did
not want to see the state fall behind in updating its AVIS program and felt it
was wrong not to include money in the budget to continue forward with the KAVIS
program. Mr. Roberts said that he would arrange a meeting with Representative
Lee, and the Cabinet’s budget, program, and technical staffs.

Chairman Collins spoke of constituents’ complaints regarding
a primary seatbelt law. He noted that during the 2000 Session there was
tremendous opposition and that it would have been impossible to pass the
measure. He also said that the situation where the primary seatbelt law was
being enforced by the State Police “Click It or Ticket” Program, even though a
primary seatbelt law had not been passed, generated additional opposition.

Representative Mongiardo said that, being a head and neck
surgeon, he used to be in surgery three and four times a week dealing with
facial trauma from automobile accidents, but since Kentucky’s seatbelt law was
enacted, he is only in surgery once a month for the same type of accident. He
said that not only have lives been saved, there are fewer traumas, which helps
control health care costs.

Representative Haydon commented that he too had heard
objections to the enforcement of a primary seatbelt law after the 2000 Session,
but, he believed there was a renewed interest in security since September 11,
2001, and hopefully and new interest in law enforcement.

Representative Bowling mentioned a $22 million highway
project on I-64 in Jefferson County that was finished 14 weeks early and the
contractor received a $5 million reward fee for the early completion. He questioned
the Cabinet’s incentive policy. Mr. Linkes said that the Cabinet considers
public benefit when incentives are offered. He said that had the Cabinet taken
the usual renovation means of closing one lane at a time, the project would
have continued from April until November with long backups every day during
those months. Mr. Linkes continued that by offering a big enough incentive the
contractor works overtime to complete the project. Representative Colter
questioned whether or not the $5 million incentive could not have been put to
better use, such as the much-needed road projects in Clay, Laurel, and Leslie
Counties.

The next item on the Committee’s agenda was a presentation
by the Kentucky Ohio Chapter of the American Concrete Pavement Association.
Mr. Otten gave a fiscal analysis of using concrete in lieu of asphalt for
highway construction. The analogy contained various agency and public costs,
pavement design, salvage expectancy, as well as truck fuel economy.

Mr. Otten showed that over the construction period and a
forty-year maintenance period, a one-mile, four-lane highway would cost the
Transportation Cabinet $300,000 less if it used concrete instead of asphalt.
He pointed out that the initial costs were higher in the usage of concrete, but
its overall maintenance was lower. As salvage potential, that same stretch of
highway, after its forty-year usage, would yield $400,000 for the concrete
versus $500,000 for asphalt. As for truck fuel economy, Mr. Otten purported
that trucks use less fuel while operating on concrete. He quoted a forty-year
user savings of $693,546. In closing, Mr. Otten said that currently, asphalt’s
highway life expectancy is fifteen years, whereas concrete’s life expectancy is
thirty plus years. Senator Moore asked Mr. Otten if there was a difference in
the time needed for construction between concrete and asphalt. Mr. Otten
replied no and noted technology exists for rapid setting concrete that makes it
comparable to asphalt.

Senator Moore inquired if during repair and maintenance work
concrete is ever laid over asphalt. Mr. Otten replied yes.

Senator Kelly questioned Mr. Otten’s construction costs for
concrete versus asphalt – especially in light of Kentucky’s unique geographic
location and frequent “freeze-thaw” cycles. Mr. Otten said that costs he had
presented were based upon numbers the Kentucky Transportation Cabinet would use
to calculate construction costs.

Senator Kelly asked about the concrete industry’s ability to
be competitive with the asphalt industry when bidding on highway projects. Mr.
Otten said many contractors set up a concrete plant on-site when working on a
major highway project which makes their industry extremely competitive.

Senator Kelly inquired that if Kentucky should by statute
require a greater percentage of highway projects be completed with concrete
would that limit the number of Kentucky asphalt contractors who could switch
over to concrete. He also asked if that would require work to be done by more
out-of-state contractors. Mr. Cooper replied that many Kentucky contractors
currently work in both asphalt and concrete. Mr. Otten added that contractors
could readily obtain the equipment necessary to switch from asphalt to
concrete, but he admitted the equipment would be expensive to purchase.

Representative Marcotte commented that the use of concrete
in highway projects is important but that Mr. Otten’s cost figures on the fuel
economy savings between asphalt and concrete were confusing.

At this time Senator Moore assumed chairmanship of the
Committee.

Next, the Kentucky Motor Transport Association (KMTA)
presented a follow-up on truck taxation issues. Mr. Ed O’Daniel said that
Kentucky ranks fifth in the nation for having the highest tax burden on trucks
over 60,000 pounds. He said that Kentucky is the only state that has a sales
and use tax on the purchase of trucks and the only state in the region, with
the exception of Tennessee, that has a sales tax on truck parts. On a chart
entitled, Annual State and Federal Taxes and Fees, as of January 2001,
prepared by KMTA, Mr. O’Daniel showed that Kentucky was the only state that
taxed or charged a fee on trucks in every possible category. He noted that
taxation and the fee charges have a large impact on where a trucking firm
headquarters, invests its capital, and ultimately provides jobs.

Depicting information from two charts prepared by KMTA, the
first entitled Annual Sales Tax Per Truck and Estimated Gross Revenue for
2001, Mr. O’Daniel noted the following state information – Missouri
receives $5,241 billion in truck taxation but generates a $3.7 billion trucking
industry; Illinois receives $6,401 billion in truck taxation with a $7.1
billion industry; Indiana receives $5,702 billion in truck taxation and a $6.1
billion truck industry; Ohio receives $4,576 billion in taxation while
generating a $8.5 billion industry; West Virginia receives $6,167 billion in
taxation and has a $.33 billion industry; Virginia receives $6,675 billion in
taxation and has a $3.1 billion industry; and Tennessee receives $4,855 billion
in taxation and has a $20.1 billion industry; while Kentucky receives $8,056
billion in truck taxation and generates only a $1.6 billion industry. The
second chart was entitled Highest and Lowest Annual Taxes Per Truck.
Information depict from this chart showed the five states levying the highest
taxes on trucks over 60,000 pounds were Oregon with a $9,921 billion taxation,
New York with a $9,341 billion taxation, Arizona with a $8,856 billion
taxation, Massachusetts with a $8,060 billion taxation, and Kentucky with a
$8,056 billion taxation. The states levying the lowest taxes on trucks over
60,000 pounds were Georgia with a $3,781 billion taxation, New Jersey with a
$3,543 billion taxation, Louisiana with a $3,484 billion taxation, and Oklahoma
with a $3,054 billion taxation.

Mr. O’Daniel said that in the early 1980’s Kentucky, along
with other states enacted weight distance taxes, which did not prove
successful, due to the development of the International Fuel Tax Agreement
(IFTA). He said that, one-by-one these states repealed their weight distance
taxes and shifted to a tax that could be fairly and competitively collected
using IFTA. Mr. O’Daniel said that currently, no state east of the Mississippi
River has the antiquated weight distance tax, except for Kentucky and New
York. He said that the states that have repealed their weight distance tax
were happier because it eliminated the collection and audit inefficiencies, and
that the trucking industry was happier because they no longer were required to
keep the immensely detailed records associated with that tax.

Mr. O’Daniel stated that the KMTA hopes that Kentucky will
join the other 44 states by repealing its weight distance tax in favor of a
more modernized system, using IFTA. He said that KMTA does not propose
eliminating the $75 million generated by the tax, but rather proposes a more
sensible modern system of taxation. Two suggestions were to increase the
diesel fuel by three cents, thus raising it to equal the price of gasoline and
by increasing registration fees for trucks over 60,000 pounds by 126 percent.

Mr. O’Daniel introduced Ms. Sonja Sanders, Executive
Director of the Kentucky Motor Transport Association, and employee of a large
trucking company that had recently moved its headquarters from Madisonville,
Kentucky to Jacksonville, Florida. Ms. Sanders said that the trucking firm
moved to Florida after operating 65 years in Kentucky, uprooting some 600
employees. One of the reasons for the move, Ms. Sanders said was Kentucky’s
taxation on its trucking industry. Mr. Bill Usher, owner of a trucking company
in Kentucky, commented that Kentucky’s sales tax law forces him to purchase his
trucks out-of-state.

Representative Ballard commented that not only did
Madisonville lose the trucking firm’s revenue when it relocated to Florida, but
other jobs were lost as a result of their move, such as fast food and retail
businesses dependent upon those 600 individuals. And, he noted, that many of
those uprooted individuals had been very active in the community. He said that
the trucking firm’s decision to leave Madisonville had a rippling effect
throughout the community and surrounding communities.

Representative Hall commented he owned several large trucks
and understood personally the tax burden placed upon Kentucky’s truckers. He
said he fully supported KMTA’s efforts to bring about tax reform for the
trucking industry. Representative Hall also said he wanted to pursue urging
the Transportation Cabinet to allow large trucks to be registered on a local or
regional basis rather than the current system, which requires registration to
be completed in Frankfort.

Senator Mongiardo said he empathized with the trucking
industry but that he felt that the state needed comprehensive tax reform rather
than piece-meal reform for individual industries.

Senator Mongiardo asked the KMTA representatives if factors
other than taxation, such as proximity or manufacturing played a roll in
trucking firms relocating to other states. Ms. Sanders replied yes there are
often other factors that play a role in a decision to relocate.

Senator Mongiardo expressed concern that Kentucky would lose
revenues if it increased the cost of diesel fuel by three cents. Mr. O’Daniel
noted that a three cent increase would make Kentucky’s gas tax comparable to
the rate levied by Tennessee but still less than the other surrounding states.

Senator Mongiardo asked Mr. O’Daniel about figures he had
cited relating to increases in employment in Louisville versus Southern
Indiana. Senator Mongiardo wanted to know if the figures reflected all
employment or only employment in the trucking industry. Mr. O’Daniel replied
only the trucking industry.

Representative Cornett echoed Senator Mongiardo’s comments
relating to the need for comprehensive tax reform. He also voiced concerns on
how KMTA’s proposals would affect small local trucking companies.

Senator Sanders cautioned the Committee that, according to
the state’s statutes, only 52 percent of the additional three cents diesel fuel
tax money discussed by Mr. O’Daniel would go to state, while the other 48
percent would be sent back to the local communities. He said he wanted the
members to be aware that the state would not receive the full benefit of the
three cents increase, without statutory changes.

Representative Bowling asked if anyone knew what was the
state’s economic impact, due to a trucking firm leaving Kentucky. Chairman
Moore stated that according to the information he received from the Economic
Development Cabinet it was seven times the amount generated by the trucking
industry.

Senators Kelly and Borders both thanked Chairman Moore for
bringing this serious issue before the Committee. Senator Borders stated that
Chairman Moore had preached this problem for several years and only now were
other members beginning to understand its seriousness.

Senator Kelly stated that in truth, Kentucky only collects a
portion of the taxes levied on trucks because parts are generally purchased out-of-state.
Mr. O’Daniel agreed. Senator Kelly also noted that Kentucky was unlike Oregon
and New York because both of those states have large active ports.

Senator Kelly commented that the General Assembly did not
need to take the “all or none” approach to tax reform. He said he was
confident the legislature could help one industry while maintaining an eye on
the big picture. Senator Borders agreed with Senator Kelly that the
legislature could offer relief in one area without getting into comprehensive
tax reform.

Last on the Committee’s agenda was the review of two
administrative regulations. They were 601 KAR 1:030 (Hearings Governing Motor
Carriers) and 603 KAR 7:090 (Railroads). Ms. Hollie Spade, Kentucky
Transportation Cabinet was on hand to answer committee members’ questions.
Representative Barbara White Colter moved to approve the regulations, as
submitted. Representative Cornette seconded the motion, which passed by voice
vote.

With no further business before the Committee, the meeting
adjourned at 12:10 p.m.